Under the millennial influence
Wanting to see products firsthand is the main reason why Australian retail consumers continue to shop in physical stores, a study shows.
Property firm CBRE’s latest research found Aussie shoppers continue to shop in physical stores and reflect the growing influence of millennials on shopping habits – as well as the margins that operators within different retailing categories can trade on.
“I like to see the products” was the most common reason why consumers continued to visit physical stores in a survey, with 56 per cent of respondents nominating this option, followed by being able to get the product “there and then”, and “I want to try the items on”.
Zelman Ainsworth, CBRE senior associate director, said the firm’s research also showed luxury stores can generally pay 20 per cent of their sales on rent – clearly the most comfortable margin of any category. Fashion was next, at around 12 per cent, followed by cafes at 7 per cent, restaurants at 5 per cent, and supermarkets with 4 per cent.
“It is important to understand the differences between retail categories as this will affect their profitability and viability,” Ainsworth said in a presentation at the Australian Property Institute’s VIC State of the Market event last week.
“If a luxury store is turning over $1 million in sales each year, they can afford to pay $200,000 a year, however a supermarket earning the same amount only has the capacity to pay $40,000.”
Based on data collected from 1,000 Australian millennials – those born between 1982 and 2001 – CBRE found 70 per cent of non-food purchases are made in-store, while 20 per cent of respondents suggested they want to increase their spending on food and beverage and entertainment over the next three years.
“Food and beverage has been a stand-out retail performer due to its more defensive nature against online shopping,” Ainsworth said.
The research also revealed around one-third of millennials’ income is spent on leisure, and one-fifth is saved.
One quarter see shopping in physical stores as a way to spend time with friends and family, while the 9.7 days per month spent on dining out and going to live entertainment reflect a passion for going out and the experiential.
CBRE said mid-range fashion retailers have been the worst hit of all categories – largely due to the introduction of fast-fashion international retailers such as H&M and Uniqlo – accounting for around 44 per cent of retail administrations and exits over the 2015-2017 period inclusive.
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